When it comes to saving for college, every little bit helps. Each dollar you save and invest is one dollar you won’t have to borrow, come up with later, or rely on someone else to provide. So even if you get a late start or are only able to set aside a small amount, you’ll still be better off than if you’d saved nothing at all.
Use this calculator to set a goal: How much should I be saving for college?
Note that you can enter today’s annual total cost of tuition, room and board at your target college (look up the sticker price for more than 700 schools at the MONEY College Planner). Or you can set a lower bar. One common savings guideline is to aim to put aside a third of your kids’ expected college costs by the time they’re on campus. The next third can come out of your income—plus grants and scholarships—when tuition comes due. For the final third, you or your kid can turn to student loans.
You may also want to adjust the assumptions for how much college costs will go up and your savings will grow. In recent years, college inflation has slowed at around 4% a year thanks to improved state budgets and growing price competition among private colleges. That’s probably a reasonable assumption to use for the coming years.
Also, even though stock have returned 8% on average over the long run, remember that you need a more conservative stock/bond mix for college savings that you’ll be tapping within 20 years, or maybe in less than a decade. In that case, figure on a 4% or 5% annual return instead, which is the more typical return for conservatively managed 529 college savings plans.